Watching Holiday Spending Habits
Wednesday - November 15, 2006
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Del.icio.usI don’t know about you, but I’m on a really tight budget this year as far as holiday shopping goes. It’s a struggle for me emotionally, as I love nothing better than to combine my joy of shopping with doing something for my loved ones to make them feel appreciated. I have a tendency to go overboard when it comes to giving gifts, so this year, I really need to buckle down and develop a plan of “holiday shopping” action.
Brian Y. Chang, CFP, CLU, ChFC and CFS of Deutsch and Chang, who has been helping me with our money managing series, contributes to this month’s column by sharing a few tips for watching your spending habits during the holidays.
Chang says most people have a list of family and friends they want to buy a gift for but no dollar limit on how much should be spent per person.
I know for myself, I tend to start buying early and I end up forgetting what I’ve bought and for whom, so in the end I’ve over-bought for everyone.
“You should really sit down and find out how much you can spend total for all gifts, then split this amount per person,” he says. “Then divide this money into separate envelopes marked with each person’s name and put cash in each envelope equal to the dollar limit you have set.”
That way, says Chang, when you do purchase your gifts, you will have the cash on hand for the purchase and you can put the receipts in the same envelope to keep track of everything.
“DO NOT use your credit cards when Christmas shopping, even if you plan to pay off the balance in full or you plan on taking advantage of a zero percent interest offer,” he says. “Statistics show that people spend about 30 percent more when using a credit card vs. cash/debit cards.”
Chang also notes that a good strategy for ensuring that you will have cash on hand for the holidays is to open a Christmas savings account at the bank.
“These type of accounts won’t let you touch the money until the end of the year,” he explains. “If you plan on spending $1,500 for gifts, then start socking away $125 per month into this account.
“That way you won’t be forced to use your credit cards. Once the holidays roll around, take this money and buy a gift card for the shopping center you do most of you shopping at for yourself. Then buy your gifts using the gift card. What this does is ensure that you don’t spend the money on other things. When the gift card starts running low, you know that you are approaching the upper limits of your holiday budget.”
Chang also recommends reducing the number of gifts that you have to purchase. Suggest to your friends and family to set up a “secret Santa” where everybody puts their name in a jar and you pick a name for just one person for whom you will buy a present. It can get costly when your Christmas shopping list includes presents for your parents, aunts, uncles, cousins, nephews and nieces, as well as co-workers and your friends!
“That way you will be able to buy a better gift, but it costs less overall for you,” says Chang. “Consider also buying gifts in bulk, then splitting them into individual gifts. You could buy a case of wine, then wrap the individual bottles as gifts. Try to take advantage of all the post-holiday sales in January to buy gifts for the following Christmas.”
While many of us might feel guilty if we don’t buy a Christmas gift for every person we know, the reality of the holidays are that most of us are strapped for cash. You don’t want to start out the New Year in debt. So shop wisely.
E-mail Brian Y. Chang at .(JavaScript must be enabled to view this email address) or call him at 597-9197.
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